When analyzing the decision to change the cash discount policy,the firm should:
A) choose the policy with the highest order size.
B) choose the policy with the lowest variable cost.
C) choose the policy with the lowest NPV.
D) choose the policy with the highest NPV.
E) choose the policy offering the lowest cash discount.

Question

Quizplus · Accepted Answer

The firm should choose the policy with the highest NPV since this would result in the greatest increase in the firm's overall profitability. Choosing a policy with a lower NPV would not be optimal as it would result in a lower return on investment.

When Analyzing the Decision to Change the Cash Discount Policy,the